How the Top 50 works

The exact rules behind the list, in plain English. Built for long-term readers.

In short: four times a year we score every S&P 500 company on six areas of its long-term financial record, compare it only with similar companies, and list the 50 with the strongest records. A buffer rule keeps the list stable. It is information about company finances, not a recommendation to buy or sell anything.

1. Which companies

All companies in the S&P 500, an index of about 500 of the largest companies listed in the US, taken from Wikipedia's S&P 500 page. A company is ranked only if enough of its data is available (at most one area missing). Companies with more than one share class (for example Alphabet) appear once.

2. Compared with similar companies

Each company is compared only with companies in the same sector (the standard "GICS" groups, such as Health Care or Energy). For every measure we work out its percentile within the sector: 80 means it did better than about 80% of its peers on that measure. Each area's score is the average of its measures, and the overall score (0 to 100) combines the areas with the weights below.

3. The six areas and their weights

Profitability, 25%: gross, operating and net profit margins, return on equity, and return on invested capital. Each uses the 5-year average blended with the latest year (about two-thirds 5-year), so one unusual year doesn't dominate.
Consistency, 20%: how steady the business has been over up to 8 years: stable profit margins and returns, how many years free cash flow was positive, and how many years sales and earnings per share grew.
Cash flow, 15%: operating cash flow as a share of sales (cash from the business before investment spending), free cash flow as a share of sales (5-year average blended with the latest year), and "cash conversion" (how much reported profit arrives as cash). Using both means companies investing heavily, for example in AI data centres, aren't treated as weak just because they are investing.
Growth, 15%: average yearly growth in sales and in earnings per share over the last 3 and 5 years.
Valuation, 15%: the share price compared with profits, free cash flow and operating earnings (EV/EBITDA) versus sector peers, and the price-to-earnings and price-to-sales ratios compared with the company's own usual level over recent years. A lower price for the same results scores higher.
Balance sheet, 10%: debt compared with shareholders' equity (lower is better), the current ratio (short-term assets versus short-term bills), and interest cover (how easily profits pay the interest on debt).

4. Banks and insurers

For the Financials sector we skip measures that don't fit how they make money: gross margin, the cash flow area, the current ratio, interest cover, EV/EBITDA and price/sales history. We use return on assets instead of return on invested capital, net margin and return on equity for consistency, and price compared with book value in valuation.

5. Refreshed quarterly, with a buffer

Company results are reported every three months, so the list is refreshed four times a year, around the 15th of February, May, August and November (about two weeks after each earnings season). To avoid needless churn:

a company already on the list stays unless it falls below #65 in the full ranking;
a new company joins only if it ranks in the top 40;
any remaining places go to the best-ranked companies.

Each list is saved and published so changes can be checked over time.

6. The two price labels

Price vs sector: "Lower" if the valuation score is in the top third of its sector (investors pay less per dollar of profit, cash flow or sales than for most peers), "Higher" if in the bottom third, otherwise "Similar".
Price vs own history: today's price-to-earnings compared with the company's usual (median) level over recent years: "Cheaper than its usual" if at least 15% below, "Pricier than its usual" if at least 15% above, otherwise "Near its usual".

We deliberately don't call companies "undervalued" or "overvalued". A low price can reflect real problems, and a high one can reflect strong expected growth. The labels describe today's numbers; they don't predict anything.

7. Big Tech and Chipmakers tables

Below the Top 50 we always show a fixed set of well-known companies (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, Tesla, Oracle, and major chipmakers) with the same scores and their rank among all scored companies. They are shown for reference and scored by exactly the same rules; inclusion is not an endorsement.

8. Handling odd data

Growth figures are capped between −50% and +60% a year so one-off jumps (for example from an acquisition) don't dominate.
Current ratio is capped at 4 and interest cover at 50.
Losses or negative equity are ranked at the bottom of the relevant measure.
Consistency measures need at least 5 years of history; a measure only counts for a sector if at least half of its companies report it.

9. Data and limitations

Company figures come from Finnhub's free financial data: 5-year averages, the latest twelve months, and up to 8 years of annual results. Data can be delayed, incomplete or wrong, and scores depend on the rules above, which are a simplification. Past results don't guarantee future results.

10. Information only

The Top 50 is not investment advice and not a recommendation to buy, sell or hold any stock. Please read our disclaimer and talk to a licensed professional before making financial decisions.